Measuring Economic Health Memo

Measuring Economic Health Memo
Shavonde Chase
University of Phoenix
ECO212: Economics
Joe Timmerman
November 28, 2010

Measuring Economic Health Memo
The main goal of most macroeconomists is to ensure that people are as happy as possible. Because happiness is numerically impossible to gauge, economists developed the idea of using the level of services and goods being produced and consumed as the most precise monetary technique to estimate economic health. Economic health is thought to be understood by learning the significance of gross domestic product (GDP), fiscal policies’ effect on the economy, and the roles of government agencies that determine national fiscal policies. All of these are essential in understanding the proper mechanism of the economy.
GDP oftentimes is positively correlated with the standard of living. The GDP is an assessment of a country 's economic output. Economic output is the market value of final goods and services made within the perimeter of a country in any given time and has a direct effect on the business cycle. The business cycle is short-run fluctuations of GDP around its trend path. The trend path reflects the long-term growth or development of the economy. When real GDP falls toward a low point, the economy is said to be in recession and when it expands toward a high point, the economy is in a boom. Negative growth rates characterize former periods and positive growth rates characterize latter periods. A slowdown occurs when the growth rate of GDP falls below the trend level but remains positive.
Four government agencies establish national fiscal policies. Congress established the Department of the Treasury to manage government income. The main duties of the Department of the Treasury consist of managing finances, collecting taxes, paying bills, producing currency, managing accounts and public debt, supervising banks, implementing federal finance and tax laws, and investigating and prosecuting tax evaders. The Office of Management and Budget’s (OMG) primary mission is to support the president in managing the national budget and supervising administration in the Executive Branch. The OMB also assesses agency programs, policies, and procedures, evaluates competing funding demands among agencies, and establishes funding priorities. In each of these areas, the OMB 's role is to lessen unnecessary burdens on the public. The direct staff of the president and the several levels of support comprise the Executive Office of the President (EOP). Sometimes the EOP has created agencies that should have belonged in the departments but have been given presidential status to indicate their significance to the government. Such agencies include the Office of Economic Opportunity in which formed anti-poverty programs in the 1960s. EOP also assists the president in supervising the executive branch. The EOP supports the Congress in meeting its legitimate duties. It also helps improve the performance and ensure the accountability of the administration for the good of the United States citizens. The GAO 's auditors perform not only financial audits but also engage in a broad range of performance audits.
Inflation is a rise of services and goods in an economy over a period. When the price level raises, each unit of currency purchases less services and goods; as a result, inflation is furthermore an erosion in the purchasing power of funds. Government spending and increasing taxes can affect the economy negatively by driving up inflation because there is no product or service produced for the marketplace. The Phillips curve is a historic inverse relationship between the rate of inflation and the rate of unemployment. This means that as the unemployment rate lowers nominal wages will increase. Government spending and the decrease of taxes can affect the economy positively by giving people income and thus encouraging the purchase of goods and services. Short run success is desirable because it can influence the path of the economy; however, government spending is ineffective in the long run because it eliminates an equal amount of household spending.
The use of GDP to measure the business cycle, roles of the government agencies that establish fiscal policies, and the effects of the fiscal policies are key factors in the economy. When studying economic health, these have been most evaluated. Nevertheless, they do not always give a complete indication because they do not consider modifiable factors such as resource depletion, pollution, defensive expenditures, and higher education. For the economy to be evaluated appropriately, new measures need to be developed and implemented.

References Hubbard, R.G., & O’Brien, A.P. (2010). Economics (3rd ed.). Boston, MA: Prentice Hall. Smith, L. (2010). High GDP Means Economic Prosperity, Or Does It?. Investopedia ULC.Retrieved from http://www.investopedia.com/articles/economics/08/genuine progress-indicator-GPI.asp?partner=worldnow Wikimedia Foundation, Inc. .(n.d). Executive Office of the President of the United States. Retrieved from http://en.wikipedia.org/wiki/Executive_Office_of_the_President_of_the_United_States Wikimedia Foundation, Inc. .(n.d). Executive Office of the President of the United States. Retrieved from http://en.wikipedia.org/wiki/Executive_Office_of_the_President_of_the_United_States
Wikimedia Foundation, Inc. . (n.d). Office of Management and Budget. Retrieved from http://en.wikipedia.org/wiki/Executive_Office_of_the_President_of_the_United_States

References: Hubbard, R.G., & O’Brien, A.P. (2010). Economics (3rd ed.). Boston, MA: Prentice Hall. Smith, L. (2010). High GDP Means Economic Prosperity, Or Does It?. Investopedia ULC.Retrieved from http://www.investopedia.com/articles/economics/08/genuine progress-indicator-GPI.asp?partner=worldnow Wikimedia Foundation, Inc. .(n.d). Executive Office of the President of the United States. Retrieved from http://en.wikipedia.org/wiki/Executive_Office_of_the_President_of_the_United_States Wikimedia Foundation, Inc. .(n.d). Executive Office of the President of the United States. Retrieved from http://en.wikipedia.org/wiki/Executive_Office_of_the_President_of_the_United_States Wikimedia Foundation, Inc. . (n.d). Office of Management and Budget. Retrieved from http://en.wikipedia.org/wiki/Executive_Office_of_the_President_of_the_United_States